USDCAD keeps moving in an ascending channel

The USDCAD currency pair is correcting in the middle of an uptrend on Wednesday ahead of a key US inflation indicator and the Bank of Canada's interest rate decision. In addition, investors are awaiting the publication of the Federal Open Market Committee (FOMC) meeting minutes. These data will help determine the timing and scale of potential interest rate cuts in the US and Canada.

Rafael Bostic, President of the Fed's Atlanta branch, said the central bank may not cut interest rates at all this year if progress against inflation stalls and the economy continues to perform well.

According to LSEG, traders have reduced their forecasts for a rate cut to the lowest level in six months. They now expect it to fall by only 60 basis points during this year on the back of a strong US economy. Meanwhile, the CME Group FedWatch tool suggests that the probability of a first move in that direction in June is about 60%, while the chance of a rate hold rises to 40%.

As for the Bank of Canada, investors are taking into account the risks of announcing the start of a monetary easing campaign today in the accompanying statement from the regulator. According to market participants, Canada's central bank is expected to keep the key rate at a 22-year high of 5%. However, the rate is predicted to be decreased in June.

Speculators raised their bearish bets on the Canadian dollar to the highest level since December, as data from the US Commodity Futures Trading Commission showed on Friday.

USDCAD quotes are forming an upward corrective trend on the H6 timeframe. The price is testing the local support of the channel. Today's strong news background may correct the currency pair to the support of the ascending channel. Positive values in the Bulls Power indicator (standard values) show an upward price trend.

Signal:

The short-term outlook for the USDCAD pair suggests buying around the level of 1.3490. 

The target is at the level of 1.3690.

Part of the profit should be taken near the level of 1.3615.

A Stop-loss could be set at the level of 1.3370.

The bullish trend is short-term, so trade volume should not exceed 2% of your balance.